Article · Tax

Cyprus 50 percent exemption: three rules, not one

Three exemptions sit side by side in the Cyprus Income Tax Law, they are mutually exclusive, and the newest applies not to new arrivals but to returnees.

By Alexander Volkhine24 October 20263 min read

€55,000 since 202217 years25 % only for returnees

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What is a salary tax exemption?

Normally your whole salary is taxed. An exemption takes part of it out of the calculation before the tax rate is applied. Under the 50 percent rule half the salary stays out: someone earning €80,000 is taxed as if they had earned €40,000.

In short

Cyprus has three exemptions for the salaries of people who move there, and they are mutually exclusive. Article 8(23A) exempts 50 % of employment income for 17 tax years if annual remuneration exceeds €55,000 and the person was not tax resident in Cyprus in the 15 years before the employment began. The €55,000 threshold entered the Official Gazette on 26 July 2022, retroactive to 1 January 2022, and replaced the earlier limit of €100,000; the 2026 reform changed nothing about it. An amendment of 30 June 2023 raised the period of non-residence from 10 to 15 years and replaced "first employment" with "any employment", so a change of employer no longer ends the exemption. Article 8(21A) exempts 20 % of salary or a maximum of €8,550 a year for seven years for qualifying first employments beginning by 31 December 2027. Article 8(21B), inserted by Law 17(I)/2026, exempts 25 % up to a maximum of €25,000 a year for seven years; it is aimed at returnees, because the person must not have been resident in Cyprus for seven years but must have been resident at some point before that.

€55,000Threshold of the 50 percent exemption, since 2022
17 yearsDuration of the 50 percent exemption
15 yearsNon-residence beforehand, 15 since 2023 instead of 10
€8,550Cap on the 20 percent exemption
€25,000Cap on the new 25 percent exemption
17(I)/2026The law that introduced the 25 percent

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Three exemptions that exclude each other

This is not one rule with variants but three separate provisions. Using one means not using the others.

	Exempt	Cap	Duration	For whom
8(23A)	50 %	none	17 years	remuneration above €55,000
8(21A)	20 %	€8,550 a year	7 years	first employment by 31.12.2027
8(21B)	25 %	€25,000 a year	7 years	returnees

The threshold fell in 2022, not 2026

Here many overviews quote the wrong year, and it comes from the fact that something did happen in 2026, only elsewhere.

What happened in 2022: the threshold of the 50 percent exemption fell from €100,000 to €55,000, and the duration rose to 17 years. Published in the Official Gazette on 26 July 2022, retroactive to 1 January 2022.

What happened in 2023: an amendment of 30 June 2023, also retroactive to 1 January 2022, raised the prior non-residence from 10 to 15 years and replaced the term “first employment” with “any employment”.

What happened in 2026: to Article 8(23A), nothing. What was added is the new exemption under Article 8(21B).

The 50 percent exemption in detail

The threshold is tested annually. If remuneration falls below €55,000 in a year, the exemption drops out for that year. It revives as soon as remuneration is above it again. So it is not lost for good.

It may be reached in the first or the second year. Anyone just below in the starting year does not lose it automatically.

50 % of the entire remuneration is exempt, not only the part above €55,000. The €55,000 is an entry condition, not a tax-free allowance.

Three exemptions, three percentages, three target groups. They cannot be combined.

The new 25 percent rule is for returnees

Article 8(21B) came in through Law 17(I)/2026, and it is regularly described as a “new expat regime”. That is misleading.

The condition has two parts:

The person must not have been tax resident in Cyprus in the seven years before.
The person must have been resident at some point before that.

Anyone who has never lived in Cyprus fails the second condition and does not qualify. The rule targets Cypriots and former residents coming back, not new arrivals.

Further conditions: income above €30,000, employment beginning between 1 January 2025 and 31 December 2030, duration of seven years, that is the year of commencement and the six following. It applies to employment income and to profits from self-employment, which distinguishes it from the other two.

What we could not substantiate

The wording “15 of the preceding 20 years”. Several presentations from 2026 describe the non-residence that way. The sources resting on the 2023 amending law speak of 15 consecutive years immediately before. We follow the second reading and record the conflict.
The starting year of the 20 percent exemption. One source writes that it begins in the year after the employment starts. Others name the year of commencement. We did not check this against the statutory text.
Whether the 25 percent exemption runs from the year of commencement. A KPMG publication quotes seven years without a starting point.

Which of the three rules applies in your case, and whether it applies, decides a great deal of money over years. That belongs with somebody who knows the case: Cyprus setup from one place.

What else counts alongside

The exemption concerns income tax on employment income. It does not concern:

the GHS contribution, which falls on total income
social insurance
the special defence contribution, from which non-dom status exempts you, see the guide to non-dom status

Whether somebody becomes resident in Cyprus at all is in the guide to tax residency. What arises on payroll is in the guide to payroll.

On this page

FAQ

The 50 percent exemption: common questions.

From what salary does the 50 percent exemption apply?

From annual remuneration above €55,000. The threshold may be reached in the first or the second year of the employment. It is tested annually: if remuneration falls below it in a year, the exemption drops out for that year and revives as soon as remuneration is above it again.

Did the 2026 reform lower the threshold?

No, and this is stated wrongly in many places. The reduction from €100,000 to €55,000 was published in the Official Gazette on 26 July 2022 and takes effect retroactively from 1 January 2022. The 2026 reform changed nothing in Article 8(23A). What was added in 2026 is a completely different exemption, namely Article 8(21B).

How long do I have the exemption?

17 tax years, counted from the year in which the employment in Cyprus begins. It is granted once in a lifetime. Since the amendment of 30 June 2023 it survives a change of employer: the statutory text has since spoken of "any employment" instead of "first employment".

How long must I not have lived in Cyprus beforehand?

15 consecutive years immediately before the employment begins. Until the amendment of 30 June 2023 it was 10 years. Overviews still quoting 10 years are on the position from before that amendment. One presentation speaks of 15 of the preceding 20 years; we could not confirm that.

What is the 20 percent exemption?

Article 8(21A) exempts 20 % of employment income or a maximum of €8,550 a year, whichever is lower, for seven years. It targets qualifying first employments beginning by 31 December 2027. For anyone for whom €55,000 is out of reach, that is the relevant rule.

Who does the new 25 percent exemption apply to?

To returnees, not to new arrivals, and that is regularly confused. Article 8(21B) came in through Law 17(I)/2026. It exempts 25 % of employment income or profit, up to €25,000 a year, for seven years. The person must not have been resident in Cyprus for the seven years before, but must have been resident at some point before that. Anyone who has never lived in Cyprus does not qualify.

Can I combine two exemptions?

No. The 25 percent exemption is granted once in a lifetime and cannot be combined with either the 50 percent exemption under Article 8(23A) or the 20 percent exemption under Article 8(21A). So it is a choice, not an addition.

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How the software handles this

The article explains the rule. These pages show what Volk Accountant does about it automatically.

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Sources

Content reviewed on 16 October 2026. Not tax advice: this page explains the general rules. Your accountant decides what applies to your case.

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